A person very familiar with offshore banking and offshore FX brokerage issues has emailed me some information that is pertinent to this discussion. This source has requested anonymity, because he does not want to call the attention of U.S. authorities to his bank. And I will absolutely honor his request.
The following information comes from this source, whom I trust. You will have to decide for yourselves whether to take this information at face value.
Edit:
After posting my (re-worded) version of the information emailed to me, I got a second email from my source, taking me to task for distorting some of what he had said. He clarified some things in his second email, and I promised to correct what I had posted here.
I have decided not to try to patch up what I posted here on Monday. Rather, I will basically copy-and-paste what my source has written, blending his two emails together, editing out the redundancies, and organizing it into three paragraphs with headings (that I have added in bold type).
I hope this fix meets with his approval. And for all of you reading this post, I hope that you will find the following to be clearer than what I posted on Monday.
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Offshore companies dealing with FX brokers
FX brokers do not care about the residency of the beneficial owner and/or director of an offshore company. LLCs / Limited companies are legal entities in their own right so the residency of the owner should not be a factor.
Sensible brokers have no issue with offshore entities - regardless who the beneficial owner is.
Offshore companies dealing with banks
However, the number of banks willing to offer banking facilities to offshore companies with US connections is dwindling fast, because those banks are all getting caught up in (or trying to stay clear of) FATCA, and without banking facilities, those offshore companies aren’t able to fund trading accounts (despite being legally able to open them) because they fall foul of 3rd-party funding rules.
… so whilst there’s no technical issue with an offshore company opening a trading account, getting/retaining banking for that company is likely to get a lot harder over time.
FX brokers dealing with banks
FX brokers need to have some kind of EU banking facility in order to get access to other services i.e. Neteller, Skrill, Trustly, etc., but most EU banks are running scared and won’t take on FX brokers now.
The issue with banks (EU banks, at least) is that most don’t want to be involved with companies in the FX niche - often because (ridiculous as it sounds) they can’t seem to understand how Forex brokerages operate.
Banks that are willing to take on FX brokers tend to be smaller, so they and/or their correspondent banks get easily spooked by different rules put out by the IRS/SEC/CFTC and will pull the plug on affected clients in a heartbeat.
The same applies to card processing services - especially in terms of rates. To put it into perspective, a broker with EU connections and reasonable volume could get card transaction rates down to about 3%, but without those EU connections, rates jump to typically 6-10%. Assuming that the broker was making the typical 0.5 pip profit on each trade, someone depositing $100 would need to trade 1.2 - 2.5 lots before the broker even covered the card fees, and that makes it very difficult for ECN brokers.
[This is not an] issue for [retail] market-makers, because they have no liquidity costs.
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